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Should you’ve been preventing the mounting bearish proof up till this week, then maybe the distribution we have witnessed right here in late October has been sufficient to persuade you in any other case. It was straightforward for some to put in writing off the destructive rotation in key management teams, and perhaps you flat-out ignored the head-and-shoulders prime on the S&P 500 chart, however at this level, the load of the proof seems to have rotated clearly to the bearish facet.

In a bullish part, I like to think about the market as “harmless till confirmed responsible”. You assume that the uptrend of upper highs and better lows will proceed till some catalyst causes a change of character on the chart. In a bearish part, shares change into “responsible till confirmed harmless”, and investing includes much less of a “do I believe the market will go decrease” query and extra of a “what would I have to see to show bullish” dialogue.

So what’s subsequent for the S&P 500 now that all of us agree that the market is responsible till confirmed harmless? In the present day, we’ll determine three potential draw back targets for the S&P 500 chart utilizing value patterns, Fibonacci retracements, and conventional assist and resistance ranges.

What’s your draw back goal for the S&P 500? Watch this, after which let me know!

Draw back Goal #1: SPX 4050

Now that the S&P 500 has damaged under its 200-day transferring common, what is the subsequent most evident space for potential assist? Let’s level out that when the SPX broke down by way of the 200-day, it additionally pushed under the primary Fibonacci retracement stage round 4180. This stage represented a 38.2% drop from the July 2023 excessive all the way down to the October 2022 low, and now it is firmly within the rearview mirror.

Following this Fibonacci methodology, the 50% stage could be subsequent. That means 4050 as an inexpensive draw back goal, which occurs to be solely about 70 factors under Friday’s shut!

Bear in mind the head-and-shoulders prime we talked about earlier? The minimal draw back goal for that traditional value sample would are available in proper round 4080, which suggests now we have a “confluence of assist” the place a number of technical approaches all coalesce across the similar stage.

Draw back Goal #2: SPX 3920

What if the 4050 stage does not maintain? In that case, we are able to observe this similar Fibonacci development and look additional all the way down to the 61.8% retracement stage. This comes just under 3920 and would symbolize a couple of 15% drop in absolute phrases from the July 2023 excessive.

The 61.8% retracement stage typically represents a “level of recent return” stage, as a break under would counsel a full retracement of the unique transfer. That may imply an additional drop to the October 2022 low round 3500. However given the truth that there is no such thing as a different actual assist stage round 3920, I am inclined to think about this a secondary stage for now.

Draw back Goal #3: SPX 3800

This brings up probably the most extreme state of affairs, no less than as extreme as we’re in a position to contemplate at this explicit juncture. What if 4050 and 3920 come and go, and the market remains to be in a decline? That is when 3800 will change into the brand new space of curiosity.

Given what I’ve seen so removed from shares, together with bearish Dow Principle affirmation, breadth deterioration, and simply plain previous value declines, I am pretty assured that 3800 is an inexpensive draw back goal. This might take us down virtually 18% down from the July 2023 excessive, and about 21% off of all-time highs in January 2022.

You may see how 3800 strains up fairly nicely with the main lows in March 2023 and December 2022, however you might also discover the purple dashed line round 3815. This line exhibits a 38.2% retracement from the January 2022 excessive again all the way down to the COVID low in March 2020. That is why SPX 3800 has been on our radar for fairly a while, and why we really feel a outstanding symmetry would come to move with an S&P 500 drop again to this similar 3800 stage.

Conscious buyers know that bettering your situational consciousness includes a constant means of analyzing each main and lagging indicators to anticipate, determine, and make sure turning factors. By focusing in on the draw back targets we have mentioned right here, it’s possible you’ll simply discover that the fairness markets are beginning to truly make sense right here in late 2023!

RR#6,

Dave

P.S. Able to improve your funding course of? Try my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your personal private and monetary scenario, or with out consulting a monetary skilled.

The writer doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the writer and don’t in any method symbolize the views or opinions of another particular person or entity.